Member Sign In

You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating indiv idual securities.

If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.

Ecolab: Acquisitions Bode Well, Lowered Forecasts a Concern

On Nov 23, we issued an updated research report on St. Paul, MN-based Ecolab Inc (ECL - Free Report) – a leading provider of water, hygiene and energy technologies and services. The stock currently carries a Zacks Rank #3 (Hold).

Over the last 30 days, the Zacks Consensus Estimate for full-year 2016 earnings decreased by a penny to $4.41 per share. The stock recorded an earnings surprise of almost 0.8% in the last reported quarter and has a long-term expected earnings growth rate of 12.6%.

Ecolab recently ended its third quarter with adjusted earnings of $1.28 per share, ahead of the Zacks Consensus Estimate by a penny. However, the net sales figure was down 1.74% from the year-ago quarter and also lagged the estimate mark.

We are upbeat on the acquisition announcement of France-based Laboratoires Anios earlier this year. The buyout is expected to fortify Ecolab’s footprint and strengthen its institutional customer base and service coverage. Laboratoires Anios has a strong clientele and has presence in almost 85 countries. The company reported sales of almost $245 million (€220 million) in full-year 2015.

Ecolab’s considerable earnings growth despite the challenging business environment instills confidence. Additionally, the company's large base of recurring revenues, industry-leading technologies and excellent field service are significant propellers for long-term growth.

The company’s prospects in the Global Industrial and Global Institutional business segments are also bright. In the last reported quarter, sales at these segments scaled 2% and 6%, respectively, on a year-over-year basis.

However, on the flip side, Ecolab slashed its full-year guidance for adjusted earnings. Notably, the company expects earnings in the range of $4.35 to $4.45 per share, compared to the previously issued band of $4.35 to $4.50. Per management, unfavorable foreign currency and the impact of Venezuelan deconsolidation are expected to hurt earnings by 30 cents. Even for the fourth quarter, the company expects foreign exchange headwinds to impact earnings by approximately 2 cents per share.

Net sales at the Global Energy acquisition segment in the last reported quarter failed to impress. Notably, the segment decreased 8% in fixed currency, thanks to a decline in the company’s upstream business revenues.

Additionally, Ecolab’s current earnings yield of roughly 3.8% is lower than the industry average of 4.54%. Cut-throat market competition and integration risks are added concerns.

HMS Holdings Corp has a long-term expected growth rate of 14.26%. Notably, the company has a solid one-year return of roughly 58%.

Medidata Solutions has a strong one-year return of roughly 19.24%. The stock represents a long-term expected growth rate of 22.33%.

IDEXX Laboratories represents a solid one-year return of almost 71.07%. The company has a long-term expected growth rate of almost 14.96%.

Confidential from Zacks

Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>

Resources

Client Support

Follow Us

Zacks Research is Reported On:

Yahoo

MSN

Marketwatch

Nasdaq

Forbes

Investors.com

Morningstar

Copyright 2017 Zacks Investment Research

At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors. This dedication to giving investors a trading advantage led to the creation of our proven Zacks Rank stock-rating system. Since 1988 it has more than doubled the S&P 500 with an average gain of +25% per year. These returns cover a period from 1988-2016. Zacks Rank stock-rating system returns are computed monthly based on the beginning of the month and end of the month Zacks Rank stock prices plus any dividends received during that particular month. A simple, equally-weighted average return of all Zacks Rank stocks is calculated to determine the monthly return. The monthly returns are then compounded to arrive at the annual return. Only Zacks Rank stocks included in Zacks hypothetical portfolios at the beginning of each month are included in the return calculations. Zack Ranks stocks can, and often do, change throughout the month. Certain Zacks Rank stocks for which no month-end price was available, pricing information was not collected, or for certain other reasons have been excluded from these return calculations.

Visit performance for information about the performance numbers displayed above.